The Next Stage of Financial Inclusion

Nonprofit organizations led the way in developing microcredit offerings for the poor. Then for-profit companies took over large swaths of that newly created market. Yet research on the needs and habits of the poor shows that nonprofits continue to serve a vital function when it comes to bringing financial services to those who need them most.

Finance can be a glue that holds all the pieces of our life together. It enables money to be in the
right place at the right time for the right situation. To borrow and save is to move money from the future
to the present, or from the present to the future. To insure is to move money from a “good” situation
to a “bad” one. Ideally, we would never have to think about finance. It would be seamless, operating
in the background. It would allow us to invest and consume exactly as we deem optimal, given all the
other constraints that we have in life.

For finance to work this way, four conditions need to be in place: enforceability of contracts, an absence
of transaction costs, perfect competition, and fully rational consumer behavior. No country fully
meets these ideal conditions, of course. But in developing countries, the situation is especially challenging:
Contracts are often not enforceable; long physical distances drive up transaction costs; a lack of competition
gives a small number of firms an inordinate degree of market power; and behavioral biases (which are present in wealthy countries, too) lead people to make systematic
and costly mistakes.

For a long period, such inefficiencies prevented financial markets
from emerging in these countries, and the result was stark:
The poor had little access to credit and little ability to build savings
through formal institutions. The obstacles were simply too high for
traditional banks to want to serve them, and no one else was filling
the gap. Then, starting in the 1970s, Muhammad Yunus changed
the landscape of finance for the poor. He developed a new business
model—known as microcredit—that lowered transaction costs for
the lender and removed some of the information asymmetries that
made it difficult to lend. This innovation required some tinkering,
some exploration, and a great deal of risk. In its early stages, the
microcredit movement was not financially sustainable; it required
a subsidy. For that reason, donors and nongovernmental organizations
(NGOs) played a central role in building the movement.

Today, the business of providing microcredit has reached a stage
of relative maturity. Significantly, for-profit companies and investors
are now shifting into this space, and in some cases nonprofit organizations
have even converted to for-profit entities. In Mexico, for
example, Compartamos Banco started as a nonprofit organization
and then converted to a for-profit operation; it was the first microlender
to become a publicly traded company. SKS Microfinance,
based in India, followed a similar path.

As lenders have made that shift, at least one NGO—Unitus—has
disengaged from the microcredit field in order to focus on needs that
the for-profit sector isn’t serving. Joseph Grenny, a cofounder of the
organization, explains that decision: “Unitus found that for-profit
microcredit providers in a robust competitive marketplace tended to
provide better loan products to the poor at better interest rates than
NGOs. And yet in some regions of the world that robust
competitive
marketplace could not develop because inefficient NGOs who
dominated the sector operated with grant capital…. In the financial
inclusion sector grant funds at some point become an obstacle to
progress rather than an accelerator of change.”1 Grenny may or may
not be correct in suggesting that nonprofits pose an “obstacle to
progress.” What matters, though, is the perception that led a large
NGO like Unitus to direct its operations away from microcredit
and into other activities.

The time has come, in short, to take stock of the broad movement
to expand access to financial services among the poor. What’s next
for that movement—the movement for financial inclusion? Where
should donors and NGOs who care about financial inclusion now
turn their attention?

It’s not as though advances in the microcredit industry have
solved the problems that result from a lack of financial inclusion.
Recently, there has been a flurry of randomized trials designed to
measure the impact of microcredit projects, and these studies have
shown strikingly consistent results: Microcredit is having a positive
yet relatively modest impact on people’s lives. Across a set of studies
that cover eight countries (Bosnia-Herzegovina,2 Ethiopia,3 India,4
Mexico,5 Mongolia,6 Morocco,7 Philippines,8 and South Africa9),
researchers
found only one instance (South Africa) in which microcredit
borrowers experienced a large increase in income. (In that
case, significantly, the lender departed from the standard model
of targeting entrepreneurs and instead targeted consumers.) In addition, the programs covered by these studies produced few if
any downstream impacts in areas such as health, education, and
female empowerment. These studies show that although microcredit
rarely leads to an increase in aggregate income or long-term
consumption, it can help borrowers cope with risks and shocks by
improving their ability to smooth consumption and retain assets.
There is also some evidence (although it is not overwhelming) that
microcredit initiatives can lead to greater investment in enterprise.
Those positive outcomes are important, but they are hardly transformative
in scope or scale.

In light of these findings, and in light of the move by for-profit
companies to provide microcredit services in more and more markets,
is there a role for nonprofits in the field of financial inclusion?
To be more specific: Is there a place for subsidies in that field? Donors
and NGOS, after all, should not subsidize an activity when investor
money is readily available to serve that purpose. They should,
however, provide subsidies when there is an opportunity to close a
gap created by market failure.

Broadly speaking, there are three important roles that nonprofits
can play in the financial inclusion arena—roles that do require subsidy:
reaching populations that for-profit institutions have little or
no incentive to target; building trust between those institutions
and the populations they serve; and promoting innovation. With
the first of those roles, subsidies may be necessary over a long term.
With the second and third roles, subsidies will ideally be necessary
only until the relevant financial markets become fully developed.

Serving the Unprofitable

When a service provides a vital social benefit, there may be a justification
for subsidizing that service. For many years, that was indeed the
justification for traditional microcredit operations. But as business
processes improved, and as costs and risks decreased, the need for
subsidies became less crucial in many segments of the microcredit
market. Even so, there is a strong case for using subsidies to provide
financial services to underserved groups that for-profit institutions
do not yet target. In particular, certain populations are simply too
rural, too poor, or too young for those institutions.

Too Rural | Rural areas suffer from being not only poorer than
urban areas, but also more costly for financial institutions to reach.
The high fixed costs of serving clients in those areas often makes
for-profit microcredit operations unsustainable. Furthermore, even
in markets where formal microcredit is present, many are wary of
borrowing from a microlender. The reasons for their reluctance include
concern about price, fear of reprisal in the case of default, and
discomfort with the formality of institutional lenders.

In response to these challenges, NGOs such as CARE, Catholic Relief Services, Freedom from Hunger, Oxfam, and Plan
International
have begun to promote a mechanism of financial
inclusion—sometimes called “savings-led microfinance”—that
focuses on creating community savings groups. NGO field officers
present the savings group model to locals at a public meeting and
invite attendees to form groups. Although there are many types
of savings groups, each type follows a similar structure: About
10 to 30 people come together to make a weekly contribution to
a shared pot of savings. Rotating savings and credit associations
designate one member of the group to receive the weekly group
contribution as a loan, which the member then repays in weekly
installments. Accumulating savings and credit associations, meanwhile,
collect money into a common fund, and members who need
credit can then draw from it.

The theory behind savings groups is multifaceted. They act as
a communal commitment device, in which people make a pledge
to save and then rely on their peers to help make sure that they do
so. That device may help them overcome personal temptation and
money management challenges, or it may help them keep a commitment
to save in the face of pressure from spouses or family members.
The tight social bonds created within these savings groups also help
to ensure loan repayment; in effect, group members pledge their
social collateral to obtain a loan.10

Participants pay interest on their loans, but because they also
function essentially as co-owners of a bank, they get back part of
the interest that they and other group members pay into a common
pot. All paid interest, therefore, remains within their community as earned income. The savings group approach has other advantages. It
requires no initial outside capital, and it allows for a smooth transition
of banking operations to a for-profit financial institution once
a savings group becomes large enough to be profitable. (In several
African countries, for instance, savings groups have undergone exactly
this type of transition in partnership with Barclays Bank. In
Tanzania, similarly, Plan Tanzania launched savings groups that now
have links to formal accounts at the National Microfinance Bank.)
For that reason, and because the setup costs for a savings group are
fairly small, this model is relatively easy to scale up.

There are important limitations to the savings group model. Benefits
have to accrue without any infusion of capital, and it may take
considerable time for people to accumulate enough savings to make
a noticeable difference in household income or consumption. Those
who participate in savings groups, moreover, are not necessarily the
poorest members of their community. In one study, conducted in
Mali, researchers found that more-connected women in a village
were more likely than others to participate in a savings group.11

Too Poor | For many years, the microcredit movement has aimed to
help the poor build sustainable livelihoods through microenterprise,
cash-crop farming, and the like. Yet some people are essentially too
poor to access microcredit. In some cases, microcredit institutions
require a borrower to have an existing source of income before they
will extend a loan. Members of a
lending group might not perceive
a would-be borrower as creditworthy.
Sometimes people are
simply unwilling to accept the
risk or the price of the loan. A
microloan, moreover, will most
likely not benefit someone who is
too unhealthy to work, or someone
who does not take in enough
calories to maintain a livelihood.
In these cases, a subsidized program
may be necessary.

Consider the Ultra Poor
Graduation Model, a global initiative
launched by the Consultative
Group to Assist the Poor
and the Ford Foundation. Graduation
Model programs provide
beneficiaries with a holistic set
of services that includes livelihood
skills training, productive
asset transfers, consumption
support, access to savings opportunities,
frequent monitoring
in the form of weekly visits,
and, in some cases, health information
or health care. The goal
of the Graduation Model is to enable beneficiaries to form an asset base and to become engaged in
sustainable income-generating activities within a two-year period.

IPA and the MIT Jameel Poverty Action Lab have led randomized
trials in seven countries (Ethiopia, Ghana, Honduras, India, Pakistan,
Peru, and Yemen) where Graduation Model programs are under way.
Preliminary results show that these programs cause an increase in
household income and in consumption—food consumption, in particular.
Overall, these results show consistent and large positive impacts,
even after allowing for the high cost of program implementation.

Graduation Model programs, to be sure, offer far more than
“financial inclusion.” But I cite them as a potential model for NGOs
in the financial inclusion field because they require subsidies—something
that NGOs are, of course, built to provide—and because they
achieve what many NGOs in that field have been trying to achieve
with microcredit: They help the ultra-poor escape poverty through
the development of income-generating activities.

Too Young | For regulatory reasons, and sometimes for business
reasons, young people are another group that the for-profit sector
often fails to reach. Those under the age of 18 are typically unable
to open bank accounts, and even when they have a legal right to do
so, the business case for banks to provide that service is less than
clear. In some markets, financial institutions target young people in
an attempt to build brand loyalty, but that is not a common practice
in the developing world. To fill this gap, many NGOs now run saving
and financial education programs aimed at this population. Evaluations
of these programs have shown promising results.

Super Savers, for example, is a program implemented by the
Private Education Development Network in Uganda. The program,
which provides primary school students with a safe way to save
money, was the subject of a randomized trial conducted by IPA.
In the study, researchers assessed the impact of various payout
arrangements. In one variation, students who saved money within
the program received cash payouts, but they did so in circumstances
that effectively “nudged” them to buy school supplies with their
cash. (The supplies were available for sale at the same time and
in the same place where they could make withdrawals from their
accounts.) In a second variation, students received their payout in
the more restrictive form of a voucher that required them to make
an education-related purchase. Students in a third group served as a
control. In addition, a random half of each treatment group received
a “parental outreach” sub-treatment in which the students’ parents
learned about the program. The results were as follows:

Students in the cash payout group saved more within the
program than those in the voucher group.

Students in the cash payout group who also received the
parental outreach sub-treatment bought more school supplies
than both those in the voucher payout group and those in the
control group.

Students in the cash payout group had higher test scores
than both those in the voucher payout group and those in the
control
group.

These short-term findings suggest that saving at school can help
young people build good habits and that those habits can affect
educational outcomes. They also suggest that a less restrictive arrangement
can be more effective than one that is highly restrictive.

Longer-term results will shed light on whether programs of
this kind instill financial habits that last into adulthood. In any
event, this intervention offers a clear example of an effort to deal
with market failure: It is unlikely to pay off until the children who
participate in it become adults, and they (or their parents) may be
unwilling to pay a sufficiently high price for this service. Banks,
of course, cannot charge the future adults who will benefit from
the service. When the benefits of a program lie far in the future
and when future
beneficiaries are not in a position to cover the
current costs of the program, the case for subsidizing those costs
is fairly strong.

Building Trust

Several trust-based market failures exist that often prevent consumers
and firms from coming together to complete a useful transaction:
The two parties may have a perfectly good exchange to make, but
one of them does not believe that it can rely on the other.

We can see evidence of this problem in non-financial situations.
In Uganda, IPA collaborated with a for-profit firm and a nonprofit
organization to conduct a randomized test that functioned essentially
as a horse race: Using a single team of marketing agents, IPA
coordinated a door-to-door sales effort that involved selling medicines,
and researchers randomized whether on a given day those
agents represented the nonprofit or the for-profit firm.13 By designing
the test this way, IPA was able to hold constant the training of
the agents, and to ask simply whether customers were more likely
to buy a product from a nonprofit than from a for-profit company,
or vice versa. IPA also randomized whether the product being sold
was well known (Panadol, a pain reliever) or not (Zincaid, a product
that helps improve water quality). The results were striking: For the
well-known product, there was no difference in the purchase rate.
The marketers, when wearing shirts emblazoned with the logo of
the for-profit firm, sold that product to 78 percent of households;
when they wore a shirt with the nonprofit logo, they sold the product
to 79 percent of households. For the unfamiliar product, the difference
in purchase rate was large and significant—31 percent (when
agents represented the for-profit firm) versus 49 percent (when they
represented the nonprofit).

In the financial inclusion arena, trust problems become manifest
in several ways. Households will not save if they do not trust a bank
to engage in prudent practices, or if they worry that their savings
might be unavailable for withdrawal. People will not borrow if they
think that a lender is not forthright about the full cost of a loan,
or if they fear that the lender will use extreme measures—such as
public shame or physical violence—to collect a debt. Farmers will
not insure their crop if they do not trust an insurance company to
pay out when they submit a claim.

A randomized evaluation of a rainfall insurance program in the
Northern region of Ghana demonstrated the importance of trust
in marketing a financial product.14 In the first year of the program,
researchers offered farmers either free or subsidized rainfall insurance.
Then in the second year, researchers observed whether the
first-year experience affected farmers’ decision on whether to buy
insurance. (Each farmer was offered insurance at one of several randomized
prices.) A clear pattern emerged: Farmers who received an
insurance payout (that is, after experiencing bad rainfall) were more likely than farmers in a control group to buy insurance the following
year. But farmers who did not receive a payout (that is, because they
experienced a normal level of rainfall) were less likely than farmers in
the control group to buy insurance the following year. What’s more,
in cases where more people in a farmer’s social network received a
payout, the farmer was more likely to buy insurance the following
year. The implication is fairly stark: To these farmers, the lack of a
payout actually had a worse effect on their willingness to trust than
having no experience with the product at all.

Nonprofits have the potential to play a critical role in solving
this problem of trust. People may find them to be more credible,
and more likely to be acting in clients’ interests, than a for-profit
microfinance institution (MFI). They are in a position to provide
honest information on which MFIs are most trustworthy and on
which products are most suitable to consumers. They might, therefore,
play the role of “verifier and endorser” on behalf of particular
MFIs. Going a step further, an NGO might establish guidelines for
lenders, monitor their activities, and certify whether they engage
in responsible practices: Are there hidden fees? What methods
does a lender use to collect bad debts? Does the lender present
financing costs in a transparent and usable fashion? (See “Smart
Move” below.)

The endorsement or certification
of MFIs that provide high-quality
products may be the simplest and
most cost-effective way to overcome
the trust gap. But NGOs can
also build trust more actively by co-marketing
new products alongside
for-profit firms. Collaborative marketing
of products has the benefit
not only of increasing overall trust
in an MFI, but also of aligning consumers
with products that feature
the best terms for their purposes.

Consider again the example
of rainfall insurance. In India, researchers
tested several methods
to increase the purchase rate of that
product.15 Before the start of monsoon
season, a trained insurance
educator visited households to present
information on the features of
a certain insurance product, and
households were given the option
to buy it. In one test, researchers
sought to find out whether endorsement
by a trusted person would improve
the purchase rate. BASIX, a
microfinance institution, sent out
agents to accompany and endorse
a certain number of insurance educators
during household visits. The
agents were locals who had worked
closely with people in their village
on a series of financial products. The test yielded some telling results: Demand for insurance was 36 percent
higher in households served by an endorsed insurance educator
than in those served by a non-endorsed educator. Another finding
showed that demand for insurance was significantly higher in villages
where visits by endorsed educators had taken place.

Promoting Innovation

The nonprofit organizations that led the microcredit movement
ought to be proud of what they have achieved. The fact that for-profit
companies have mimicked them, and in some cases pushed
them aside, is a testament to their success. They innovated, and then
for-profits imitated. So one crucial role that nonprofits can play is
this: Keep innovating. Focus on developing services that improve the
financial opportunities available to clients—in particular, services
that may eventually cease to require a subsidy.

Why not rely on for-profit companies to spur innovation in the
financial inclusion arena? After all, when for-profit firms expect to
reap windfall profits, they have shown themselves to be very willing
to spend large quantities of money on high-risk innovations.
(Take pharmaceutical research, for example.) For various reasons,
however, that logic may not apply to the field of financial inclusion. When all of the upside of an innovation is likely to accrue to clients,
and not to a firm, the firm has little incentive to invest heavily in
research and development. That is especially true in cases where it
is difficult to reverse a change. If banks, for example, find that it is
not profitable to offer credit with a delayed repayment schedule,16
or at lower interest rates,17 it may be difficult for them to revert to
an earlier, more profitable practice.

Another reason that for-profit firms are unlikely to invest in this
area is that the financial returns from a process innovation may be
small or nonexistent. Patenting business process ideas is difficult,
and for-profit companies must assume that other players in the
financial
services field will soon take up any profitable innovation—and will neutralize their profitability by doing so.

NGOs may be better suited to exploring such improvements.
Their goal, after all, is not to reap financial profits, but to increase
the welfare of a population. Nor do they have to worry that competitors
might erode the returns on their investment. On the
contrary, if other parties put them out of business by offering a
similar product or service, they have a ready response: Mission
accomplished! Rather than viewing an investment in innovation
through the lens of “costs” and “expected returns,” NGOs need
worry only about the opportunity cost of not using that money
in some other way.

Here, I put forward two examples of potential innovation in
financial
inclusion: the use of equity in place of debt, and the use
of flexible repayment schedules.

The practice of offering equity, rather than debt contracts, is
one area of innovation that is ripe for exploration. In conservative
Islamic regions of the world, the use of microcredit is often
limited because many Muslims do not believe that the standard
microfinance models are compliant with Sharia law. In response,
people have begun to experiment with so-called “Islamic financial
models,” which usually replace the tools of debt and interest
with methods of leasing or selling assets. These models take
various forms: Murabaha, which allows an asset to be sold in cash
installments with an agreed-upon markup; Ijarah, in which users
pay a monthly fee to lease an asset; and Musharaka, a partnership
in which participants provide financing, time, or other resources
to support a project and then share profits and losses. Evaluating
these and other alternative ways for people to access capital is an
excellent task for NGOs. In fact, some of these models might be
applicable beyond the Islamic world. Limiting debt and focusing
on equity, after all, could be an attractive option for other kinds
of customers.18 Equity, for instance, provides a way for small business
owners to invest in growth without having to repay a loan. But
how can financial institutions make such models profitable enough
to work on a large scale? By exploring such questions, NGOs can
help to develop new financial services.

Experimenting with repayment schedules is another promising
avenue of innovation. In corporate project finance, cash flows get
matched: A firm that borrows money to build a factory typically
does not start paying back principal until the factory has begun to
generate revenue. This matching of inflows to outflows is not a standard
practice in microcredit. Instead, MFIs typically require regular
payments. Yet many MFI clients have highly variable incomes. So
adding flexibility to repayment programs could decrease default rates, increase an MFI’s potential client base, and increase the size
of potential loans. Informal providers, such as moneylenders, already
have the ability to implement this kind of flexibility. Their monitoring
is so comprehensive that they can tell whether a borrower who
misses a payment is likely to make it up later. MFIs could build a
similar capability into microcredit products by (for example) providing
clients with vouchers to present in lieu of payment.19

In a similar vein, introducing a more generous grace period early
in the loan repayment cycle could help borrowers. Currently, most
MFIs require repayment of a loan to start almost immediately. Because
it often takes a while for business investments to generate a
profit, strict repayment schedules may discourage profitable but risky
investments. Could changing the structure of repayments generate
more investment and higher long-term income?

To answer that question, a team of researchers ran a field experiment
with a population of poor, urban borrowers in India.20
Working with an NGO, the researchers increased the normal twoweek
grace period to two months for one group of clients and compared
the results for that group with the results for clients who
had to comply with the usual two-week repayment period. For
clients in the treatment group (that is, those who had the longer
grace period), the likelihood of starting a business was 4.5 percent,
compared with 2 percent for clients in the control group. Three
years later, weekly business profits for clients in the treatment
group were 41 percent higher, and monthly household income was
19.5 percent greater, than they were for clients in the control group.
Yet those improvements came at a cost. Default rates after one year
were much higher for the treatment group (6.2 percent) than for
the control group (1.7 percent).

Noting that clients were willing to pay more for the longer grace
period, the researchers modeled lender profits in a world where
clients
could choose either option. Lenders, according to this analysis,
could break even with the longer grace period if they charged
an interest rate that was more than twice as high as the normal
rate—but only if there was no change in the quality of clients. So
the viability of this repayment model among for-profit institutions
is unclear. There is a notable trade-off between increased revenue
and increased risk. But further experimentation by NGOs could
improve that equation by showing how to decrease default rates
and how to make the strategy more cost-effective.

Efforts of that kind are already under way. Kiva, a nonprofit
organization
that allows people in the United States to lend money
to microcredit institutions around the world, recently began a program
called Kiva Labs. Through that program, donors can enable
innovation in microlending by providing subsidies that encourage
lenders to absorb additional risk. As a result, lenders are motivated
to tinker—to find ways to alter their loan contracts so as to improve
access to credit among the poor.

Naturally, not all innovation will work. For that reason, donors
and NGOs need to commit themselves to rigorous testing of their
efforts and to sharing what they learn from their failures as well as
their successes.

The Changing Role of Nonprofits

The nonprofit community cleared a path for private-sector institutions
to provide financial services to the poor on a for-profit basis. This achievement has created a conundrum: What is the next step
for donors and nonprofits that view the advancement of financial
inclusion as part of their mission? They could shift their focus entirely,
by investing their resources in a field such as health or education.
(They should, after all, direct those resources to activities
that require a subsidy.) But that would be an unfortunate move. It
would leave in place several market failures that persist with respect
to providing financial services to the poor.

Here, I have outlined three roles that nonprofits can adopt to help
mitigate those market failures. First, despite the expansive reach of
the microcredit movement, there are many potential beneficiaries
whom the industry has not yet reached. The too rural, the too poor,
the too young—these groups make up important market segments
from a social welfare perspective. Nonprofits may be able to resolve
the cost issues that come with serving them. Then, as was the case
with microcredit, for-profit firms are likely to enter these newly
established markets.

Second, a lack of trust raises a large barrier to developing certain
financial services markets. Nonprofits, insofar as people are inclined
to trust them, can help people gain confidence in the products and
services that financial firms provide.

Third, many of the products currently offered by the microcredit
industry are rigid and formulaic, and for-profit firms are often unwilling
to take on the risks associated with exploring new product
options. That is particularly true when a novel offering is likely to
benefit clients more than it does any given firm. Thirty years ago,
the same limitation applied to the microcredit field, and nonprofits
took the lead in figuring out how to make lending to the poor a
sustainable business. They can and should continue the charge for
innovation in this field.

Before nonprofits can play these roles successfully, they need to
understand their larger role as advocates of financial inclusion. An
understanding of that role starts with a recognition that nonprofits
face a fundamental and intrinsic incentive problem. Compare their
incentive structure with that of a for-profit firm. The latter type of
organization has a straightforward mission: Earn profits. (Some
businesses claim to have a “double bottom line,” but that designation
does not lessen their need to make a profit.) If a firm is profitable,
it will stay in business. But if the firm pursues a bad idea, or if
it implements a good idea badly, it will lose money. Eventually, an
unprofitable firm will cease to exist. With a nonprofit, by contrast,
the ability to achieve a given mission is distinct from the ability to
raise money. A nonprofit may be brilliant at designing and implementing
programs but horrible at fundraising; in that case, it will
go out of business. Or it may be brilliant at fundraising but horrible
at designing and implementing programs; in that case, it will
stay in business.

There are different ways to deal with this problem. Donors
should demand accountability from their nonprofit grantees, and
nonprofit managers should insist on program accountability as well.
Ultimately, though, nonprofits must focus on playing a role that
reflects their core strengths: In part by deploying subsidies, they
can investigate whether a given model or approach actually works.

In the three areas of opportunity that I have discussed, the
long-term aim of the movement for financial inclusion should be
to transfer successful practices to the for-profit sector. The reason is simple: Because of its incentive structure, the for-profit sector is
well equipped to implement and sustain such practices on a large
scale. But we are not yet at a point where for-profit firms can take
responsibility for the entire field of financial inclusion. Many gaps
remain within the financial services market. Nonprofits can work
to figure out how best to fill those gaps, and ideally they will leave
behind a clear trail of evidence from which others can learn. If they
succeed in making financial exclusion a relic of the past—if one day
they notice that for-profit firms have again entered their space and
competed them out of business—then they will have achieved an
essential part of their mission.

Dean Karlan is professor of economics at Yale University and president and founder of Innovations for Poverty Action.
The author wishes to thank Plan International for supporting work on this article. (He has retained unrestricted intellectual freedom in developing the article’s content.) He also wishes to thank Ted Barnett, Sana Khan, and Glynis Startz from Innovations for Poverty Action for their assistance, and Deborah Kenchington, Jane Labous, and John Schiller (all from Plan International), along with Abhijit Banerjee, Alex Counts, Chris Dunford, Julia Levinson, Alex Rizzi, and Chris Udry, for their comments.

Is “collective impact” just a buzzword, or does it actually make an impact? Sarah Stachowiak of ORS Impact and Lauren Gase of Spark Policy Institute summarize eight important findings from a study examining collective impact’s effect on institutions, populations, and environments across 25 initiatives in the U.S. and Canada. https://ssir.org/articles/entry/does_collective_impact_really_make_an_impact

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